This was supposed to establish,
in the words of one Conservative minister, ‘a new breed of owners’ and have ‘an
important effect on attitudes’, thereby breaking down ‘the divisions between
owners and earners’.20 The Confederation of British Industry (CBI) formed a
wider share ownership taskforce and the government formed the Wider Share
Ownership Council. The ﬂoat of shares in privatized companies was said to have
‘given a boost to popular capitalism unimaginable in the pre-Thatcher era’ and the
proﬁts made by millions of small investors made it ‘difﬁcult to question the logic
underpinning privatisation’.21
Conservatives used the rhetoric that privatization would spread wealth more
widely in the community and create ‘real public ownership’ of government
enterprises to sell privatization to the electorate and to take away public ownership.

…

Its sale of shares in glass manufacturer Saint-Gobain
was promoted in a $6 million advertising campaign that included television ads that
SHAREHOLDER DEMOCRACY 197
sold the shares ‘the way US companies market soap or toothpaste . . . A network of
more than 20,000 banks and post ofﬁces pushed shares’ to customers conducting
their normal business.32
Finance Minister Edouard Balladur declared his campaign for ‘popular
capitalism’ a success when ﬂoats of these industries were heavily oversubscribed by
people wanting to buy shares in them. As in the UK, small shareholders quickly
sold their shares when the price went up. Even then, the share ﬂoats could be seen
as a success in that ordinary people had tasted ‘the fruits of capitalism’, which
some said was one of the aims of the exercise – an effort to lure people away from
socialism.

Instead, they will work quietly to do their very best, aided by the Murdoch press and others, to make sure Labour does not get in.’16 In other words, large corporate interests, deeply embedded in government and backed by the mass media, were muscling up with other sections of the Establishment to take on a democratically elected politician.
Here is the legacy of the Thatcherite crusade of mass privatization in the 1980s. Selling off public assets was billed as creating a new ‘popular capitalism’; the result was anything but. Four of the Big Six are owned by foreign companies. The only state-run energy provider is EDF – which is owned by the French government. British ‘popular capitalism’ has actually been in a steep long-term decline. Well over 50 per cent of shares on the London Stock Exchange were owned by individuals in 1963, but today that number is just over 10 per cent. By 2013, 53.2 per cent of British shares were owned by foreign investors.
The rhetoric of Thatcherism, of course, had been that of jingoism and patriotic pride.

…

It is not just British businesses and assets that are being bought up by foreign billionaires. In the first half of 2011 alone, 60 per cent of new-build homes in central London were bought by overseas investors. The £5.2 billion splashed out by foreign investors on London’s housing in 2011 dwarfed all government investment in the Affordable Housing Programme in the whole of England.17 In no sense could Britain’s modern economic system be described as ‘popular capitalism’, dominated by small-time entrepreneurs, shareholders and property owners.
Not that the failures of free-market dogma deter David Cameron’s government, keen as it is to finish what High Thatcherism had begun. Even Margaret Thatcher baulked at selling off the Royal Mail, making it clear she was ‘not prepared to have the Queen’s head privatized’. But its eventual privatization in late 2013 was in line with the ideology of Britain’s Establishment: the selling off of all public assets, and the nationalization of risk and privatization of profit.

…

But its eventual privatization in late 2013 was in line with the ideology of Britain’s Establishment: the selling off of all public assets, and the nationalization of risk and privatization of profit. While the pension fund – that is, the Royal Mail’s debt – remained in public hands, the profitable business was sold off. Yet the company was drastically undervalued, leading it to be privatized at hundreds of millions of pounds below its actual worth, depriving the taxpayer of so much revenue.
There was little pretence at popular capitalism. Investors had to have a minimum of £750 available to buy shares. ‘It is disappointing that so much has been reserved for international funds and speculators, taking away from all individual applicants in the UK,’ complained Malcolm Hurlston, the chairman of the Esop Centre, which advocates workers’ shareholding schemes.18 Two-thirds of the company was bought up by City institutions; big winners included sovereign wealth funds, including foreign dictatorships such as Kuwait.

Firstly, personal share ownership in the UK has actually fallen proportionately in the last 50 years, from 54% of shares on the London Stock Exchange in 1963 to 10% in 2010, and the amount owned is usually small. The richest 1% of the population own more than the rest put together.101 The idea of a ‘popular capitalism’, touted at the time of Margaret Thatcher’s wave of privatisations in the 1980s, in which everyone would own shares, predictably did not materialise. Most of the shares from the privatisation of nationalised industries that the public were allowed to buy were quickly sold on to large institutional ‘investors’ in order to make quick gains. So the privatisations of the 1980s did not produce popular capitalism, though it has to be said that this one-off source of unearned income was popular at the time.
Secondly, only about half (51%) of the adult population and 40% of households in Britain have their own pensions, with their pension contributions ‘invested’ on their behalf by institutional investors, leaving over half the population inadequately covered for their old age.102 Occupational pensions and personal pension plans, on average, invest over two-thirds of their capital on the stock market.103 To the extent that individual pension holders become ‘investors’ they do so mostly by having a high- and secure-enough earned income to be able to save and ‘invest’; they are only part-time rentiers at most.

New Labour enthusiasts do not like to be reminded that between 1990 and 1996, a million people lost their homes through repossession by the mortgage companies, while 390,000 homes, once publicly owned, were seized by those companies. Come 2009 almost one million properties were estimated to be in ‘negative equity’: the homeowners had paid too much for them in the first instance and could not get their money back.
Thatcher had resolved to make Britain a nation of small businesses. This was the much vaunted ‘popular capitalism’. Yet by 1997, the year of Labour’s victory, personal bankruptcies had ‘stabilized’ at 22,000 a year; 30,000 companies had become insolvent between 1990 and 1997. The ‘flexible labour market’ so beloved by Thatcher, Blair, and the transnationals had, in reality, made unemployment a mainstream experience. In December 1997, it was estimated that one in five men and one in eight women had suffered at least one extended spell of joblessness in their adult lives.

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The Man Who Knew: The Life and Times of Alan Greenspan
by
Sebastian Mallaby

Abby Cohen, interview by the author, September 12, 2011.
51. John Cassidy, “All Together Now: New Theories on Why We Can’t Stay Out of the Stock Market,” New Yorker, March 27, 2000.
52. Quoted in John Cassidy, “Striking It Rich: The Rise and Fall of Popular Capitalism.”
53. John Makin, interview by the author, October 30, 2014. Makin held a position at AEI and was also on the staff of the hedge fund Caxton Associates.
54. “It took me a long time to live that down.” Byron Wien, interview by the author, September 9, 2011.
55. John Cassidy, “Striking It Rich: The Rise and Fall of Popular Capitalism.”
56. Don Kohn confirms that the “irrational exuberance” phrase was intended to attract notice. “The paragraph on irrational exuberance was debated a lot internally. He wrote it himself, although I wrote some of the rest of that speech.”

…

Even more than Gary Stern, Mike Kelley was a constant optimist about businesses’ ability to drive productivity increases.
26. In his ninth NBI lecture, delivered in 1964, Greenspan had declared that “standards of living tend to grow at an accelerating rate.” The more ideas people generated, the more they were in a position to generate further ideas.
27. The Wall Street seer was Barton Biggs, speaking to John Cassidy of the New Yorker. See John Cassidy, “Striking It Rich: The Rise and Fall of Popular Capitalism,” New Yorker, January 14, 2002.
28. Woodward, Maestro, 171. See also Alan Greenspan, The Age of Turbulence: Adventures in a New World (New York: Penguin Books, 2008), 172. Slifman notes that Greenspan’s view that profits were relatively easy to measure was not shared by staff experts. Larry Slifman, e-mail to the author, October 7, 2015.
29. In his academic writing, Summers had pointed to the limits of market efficiency.

In 1984 he once again asked Americans the question he had posed during the presidential election of 1980: “Are you better off than you were four years ago?” They answered massively in the affirmative and gave him a sweeping reelection victory. In both the United States and Britain, conservatives exulted that they had discovered a potent political formula for gaining blue-collar votes: a combination of lower taxes, social conservatism, popular capitalism, and patriotism. In the United States these voters were called “Reagan Democrats”; in Britain they were labeled “Essex man,” after a working-class county just outside London.
Reagan and Thatcher shared a common outlook on the world. Both were suspicious of détente, and both were determined to take a tougher line with the Soviet Union. The two leaders recognized each other as soulmates. Reagan first met Thatcher in the late 1970s, when she was leader of the British opposition and he was between his first two runs for the presidency.

At last a merciful muse gave me Medicare—and thus the phrase “from late middle age to Medicare.” If you look long enough you can usually find a proper name or a metaphor that will bring those dull but necessary facts to life.
Even more time went into the sentence about Venice and Versailles. Originally I wrote, “Names like London and Paris didn’t turn up in our accounts of earlier trips.” Not much fun there. I tried to think of other popular capitals. Rome and Cairo? Athens and Bangkok? No better. Maybe alliteration would help—readers enjoy any effort to gratify their sense of rhythm and cadence. Madrid and Moscow? Tel Aviv and Tokyo? Too tricky. I stopped thinking of capitals and tried to think of tourist-infested cities. Venice popped into my head and I was glad to see it; everybody goes to Venice. Did any other cities begin with V? Only Vienna, which was too close to Venice in several respects.

However, the death of a local MP in October meant that Vincent Hanna, a BBC journalist with a talent for getting his own way, was due up north to cover the by-election, equipped with one of the new phones. The now customer-conscious BT obligingly extended the network several days early for his benefit.25
The success of the BT sale awoke Margaret Thatcher’s enthusiasm for something she now called ‘popular capitalism’. She declared in October 1986: ‘The great political reform of the last century was to enable more and more people to have a vote. Now the great Tory reform of this century is to enable more and more people to own property.’26 In that spirit, privatizations came thick and fast, and everyone was invited to join the great share sale. The biggest was the sell-off of British Gas, which brought in £5,434m.

Data
collected by Robert Shiller of Yale University confirmed that despite the
severe bear market of 2001 to 2002, as of January 2007, three-quarters of
investors believed that stocks were the best long-term investment.37
And with good reason. Stocks have returned a very healthy 15 percent per year measured from the market lows reached in October 2002
through the end of 2006. By 2007, stocks as measured by the popular
capitalization-weighted indexes were at or near all-time highs, having
recovered all their losses sustained in the bear market.
The bull and bear markets of the last decade were no different from
the bull and bear markets that preceded them. As stocks rose, the bulls
came out of the woodwork, and at the top they fabricated theories that
would support even higher prices. In the subsequent down markets, the
bears would pounce with justifications for even lower prices.

The assets distribution was even more skewed: the top 1 percent of households owned 38.5 percent of net worth, while the bottom 90 percent were left with 28.2 percent. Indeed, 18.5 percent of households had zero or negative net wealth. Much has been made of the shareholders democracy in the new forms of capitalism, but table 4.29 shows the extreme concentration of stock ownership in 1995, even when we include stock plans, mutual funds, individual retirement accounts, and other instruments of popular capitalism.
While America is an extreme case of income inequality and declining real wages among the industrialized nations, its evolution is significant because it does represent the flexible labor market model at which most European nations, and certainly European firms, are aiming.141 And the social consequences of such a trend are similar in Europe. Thus, in Greater London between 1979 and 1991 real disposable income of households in the lowest decile of income distribution declined by 14 percent, and the ratio of real income of the richest decile over the poorest almost doubled in the decade, from 5.6 to 10.2.142 Poverty in the UK substantially increased during the 1980s and early 1990s.143 And for other European countries, taking the incidence of child poverty as an indicator of the evolution of poverty, on the basis of data collected by Esping-Andersen, between 1980 and the mid-1990s child poverty increased by 30 percent in the US, by 145 percent in the UK, by 31 percent in France, and by 120 percent in Germany.144 Inequality and poverty increased during the 1990s in the US, and in most of Europe.145 I take the liberty of referring the reader to volume III, chapter 2, for a summary presentation of data and sources on inequality and poverty, both for the United States and for the world at large.

Inflows of foreign money were vast, much of it connected with Japanese investment. The British balance of payments had been suffering, because oil prices declined, and Lawson took the circumstances of 1985 as guide: the pound had indeed declined by 16 per cent against the Mark, which would of course add to inflation.
In 1986 these circumstances were to change, as the boom went ahead. ‘Big Bang’ meant that the City could bid for world financial supremacy, and ‘popular capitalism’ was an enormous success, with a great part of the population now owning assets in property or even shares. The City firms turned into ‘security houses’ as in New York, and the wonder occurred that the British sold automobiles again, even if they were from foreign-managed factories. The British addiction to buying property meant that credit based upon property assets was in heavy demand. In natural circumstances, this would have meant a rise in the pound, just as in the Reagan boom the dollar had risen.